Nigeria’s Mangled Mystery Leave Latches
Nigerian shares tried to shake off the President’s unexplained trip for medical treatment in London and were largely flat through January after a 25 percent slide in 2016, as a $1 billion 15-year Eurobond return was well received at a near 8 percent yield. It will be used for infrastructure and deficit coverage in this year’s budget yet to be passed, and also help replenish foreign reserves which have jumped above $27 billion with an African Development Bank loan and higher oil prices. Growth has turned positive but inflation approaching 20 percent has not abated with continuous currency depreciation with the official and parallel rates around 300 and 500 per dollar respectively. The central bank vows to narrow the gap in the nominal floating regime while maintaining a web of import restrictions and deploying security forces to monitor dealers. Chronic shortages deter FDI, already hobbled in the petroleum industry with joint venture rule shifts and Niger delta rebel attacks, and resulted in the recent collapse of the main domestic airline unable to process payments and procure spare parts. Amid the furor, media speculation has intensified over President Buhari’s health, with lack of information about his absence possibly reprising a predecessor’s pattern of leaving the country with a vaguely-described heart condition before dying in office. While under care he reportedly held a phone call with President Trump representing the first outreach to an African counterpart, but neither Abuja nor the White House would confirm details.
South Africa was up 3 percent on the MSCI index amid its own leadership struggle as two candidates, ANC Deputy Ramaphosa and his former wife who was head of the African Union, declared to succeed President Zuma, whose second term ends next year. He conceded “mistakes” in a January speech to the ruling party, which could still oust him early over corruption charges. In the latest municipal elections the opposition gained control of Johannesburg and other cities, and his address in Soweto acknowledged shortfalls in education, employment and public services. The post-independence black economic empowerment scheme has also been widely criticized, with activists from the Malema wing calling for outright nationalization while the business community seeks a more commercially-viable formula for ensuring native ownership. Mining giant Anglo-American has recommended scrapping the 26 percent equity allocation mandate with controversy swirling over deals with politically-connected insiders. A new industry charter will be presented in March and the company threatens to go to court if the requirement is preserved, as its chief executive cited two-decade decline. GDP growth is forecast at just 1 percent this year with rising commodity prices, with the fiscal gap to stay at 3.5 percent likely removing investment-grade sovereign ratings. The PMI manufacturing gauge rebounded above 50, but the consumer remains weak as reflected in falling personal income tax receipts. The central bank predicts higher food-driven inflation at 6 percent and a lower 3.5 percent of GDP current account deficit, but has refrained from hiking interest rates with the rand settling between 13-14/dollar. It can expect additional demand from Zimbabwe, which plummeted almost 10 percent on the MSCI in January, as the authorities moved to reintroduce local currency to generate cash for the sick economy and increasingly absent President there.